2009 CCIM Presentation

a Colliers CMN Company
CCIM Presentation
February 4, 2009
Market Overview
Presented By:
W. Grant Norling
Jeff Grose, MAI
Steven L. Waugh
PGP Valuation, Inc

www.pgpinc.com
Commitment to Values
The information contained herein has been obtained from sources we deem reliable. Although we have no reason to doubt its contents, we do not guarantee them.
The Housing Market

Steve Waugh
Industrial & Office Markets

Jeff Grose, MAI
Industrial Market Overview
• Slowing economy has and will continue to shape the

market
• Hangover – sales volume off 60-80%
• Market participants “frozen” in light of economic turmoil
• 2009 will see softening in rents and increase in cap rates
Industrial Market Overview

Portland Market & Colum bia Corridor East Subm arket (Industrial)
SUPPLY VACANCY
Period Market Submarket Market Submarket
2003 206,479,984 13,943,125 11.0% 11.1%

2004 207,813,591 14,367,305 9.1% 9.4%
2005 208,936,088 14,837,005 7.8% 8.5%
2006 211,459,670 15,538,355 6.3% 5.3%
2007 215,011,836 16,510,776 5.0% 5.0%
Q1 2008 216,041,306 16,836,510 5.6% 9.0%
Q2 2008 216,925,883 17,567,392 6.1% 12.5%
Q3 2008 216,912,451 17,567,392 6.2% 11.8%
Q4 2008 217,071,293 17,567,392 6.3% 12.0%
2008 YTD 217,071,293 17,567,392 6.0% 11.3%
AVERAGE ASKING RENT PSF/MO. (NNN) NET ABSORPTION
Period Market Submarket Market Submarket
2003 $0.38 $0.37 3,942,713 865,367

2004 $0.38 $0.38 4,988,711 459,598
2005 $0.39 $0.40 4,016,319 639,813
2006 $0.38 $0.41 4,596,790 1,236,093
2007 $0.42 $0.40 4,797,566 394,386
Q1 2008 $0.45 $0.42 65,229 -7,743

Q2 2008 $0.45 $0.42 -226,048 57,192
Q3 2008 $0.46 $0.44 -238,621 122,280
Q4 2008 $0.46 $0.45 9,118 -29,627
2008 YTD $0.46 $0.43 -390,322 142,102
Source: CoStar Property® NNN = Triple Net Y-T-D = Year-to-Date

Industrial Construction – Portland Market
Completed Construction 1st Qtr. 2008:

1,136,378 SF
Completed Construction 2nd Qtr. 2008:
1,134,520 SF
Completed Construction 3rd Qtr. 2008: 0 SF
Completed Construction 4th Qtr. 2008:
478,184 SF
Under Construction 1st Qtr. 2009: 916,345 SF
Industrial Construction
What does it mean?
Rents Sales
• Softening • Difficulty obtaining
financing
• Concessions?
• Buyers and sellers
• Pressure on landlords will not see eye to
eye in the first half
to retain roll-over
2009
tenants
• Transaction volume
will continue to be
low
Cap Rates
Acquisition Financing
Source: Real Capital Analytics
Industrial Market Trends / Forecast

• Leasing – Economic conditions will continue to limit
new tenants entering the market and existing
tenants expanding.
• Cap Rates – Rising. Risk factors will be considered
to a much greater degree than in the past.
• Overall – The market needs credibility. Once faith
is restored in financial markets, stock market, and
economy, transactions (sales and leases) can
resume. The lack of new supply coming on line
should ease the effects of the current slow down
and provide for a quick rebound when the economy
improves.
Office Market
Like the industrial sector, the office market is

feeling the effects of the recession
• New construction has been moderate in 07/08
which is softening the negative impacts for
2009
• Market participants “frozen” in light of
economic turmoil
• 2009 will see softening in rents and increase in
cap rates
Office Market – All
Portland Office Vacancy, Q4-2008

Central Business District: 7.8%
– Class A: 5.1%
– Class B: 11.4%
– Class C: 11.3%
• Net absorption for the CBD at +371,701 for 2008. Overall

market also saw positive net absorption. This is due to
limited new construction.
• Overall Portland market has 1,383,398 SF under
construction with deliveries in 2009.
• With slow economy and large amount of new product,
vacancies will rise and there will be pressure on landlords
to retain tenants.
Overall Cap Rates

Source: Korpacz Real Estate Investors Survey, Q4 2008
Regional Retail Market

2008 Overview & Forecast
Grant Norling, Retail Manager
Retail Demand
Vacancy Rates & Absorption Trends:
Portland Metro Retail Demand
Year Absorption (SF) Vacancy
1999 506,141 5.0%
2000 979,766 6.0%
2001 342,886 6.7%
2002 375,920 5.4%
2003 242,709 4.3%
2004 2,461,489 4.3%
2005 808,981 4.7%
2006 46,584 4.8%
2007 1,100,000 4.9%
2008 339,774 5.8%
Total 9,476,332
Source: Norris Beggs & Simpson Retail Market Report
Retail Demand
 2008 – 90 basis point increase in vacancy
 Largest change since 2000
 2009 – Likely first (-) negative absorption in over a decade
 More national tenants go dark
 Local and regional tenants struggle in harsh economy
Portland Metro: Where is the Vacancy?
Portland Metro: Where is the

Vacancy?
Vacant
Former Tenant
Box Spaces
City Sq. Ft.
Mervyns Vancouver 82,225
Linens N' Things Portland 40,160
Linens N' Things Portland 35,000
Linens N' Things Beaverton 45,000
Linens N' Things Tanasbourne 38,410
Levitz Clackamas 34,103
Levitz Tigard 40,041
Wickes J antzen Beach 51,350
Shoe Pavilion Portland 17,505
Shoe Pavilion J antzen Beach 19,909
Shoe Pavilion Beaverton 16,500
Total 420,203
Source: New & Neville Real Estate Services
Represents 1% of +/- 42 Million SF metro wide

Portland Metro: Soon to be Vacant

Vacant Box Spaces
Former Tenant Location Sq. Ft.
Circuit City Gateway 37,857
Circuit City J antzen Beach 37,360
Circuit City Washington Square ±37,000
Circuit City Clackamas ±37,000
Circuit City Salem ±37,000
Total 186,217
Source: CoStar®
2008 US Store Closings

Retailer Status Stores Closed
Ann Taylor Re-Structuring 117
Banana Republic Re-Structuring 25
Circuit City C hapter 11 721
Disney Stores C hapter 11 98
Foot Locker Re-Structuring 60
Linens 'N Things C hapter 11 371
Mac y's Re-Structuring 11
Mervyn's Chapter 7 149
Pac ific Sunware Re-Structuring 154
Phillips-Van Heusen Re-Structuring 175
Sharper Image C hapter 11 96
Starbucks Re-Structuring 600
Wilson's Leather C hapter 11 103
Zales J ewelers Re-Structuring 105
• Many spaces go dark in 2008

• ICSC estimates 6,100 retail chain stores exited in 2008
nation wide
Investment Grade Sales

Retail CAP Rates - OR
Type of CAP Rate Average
Year Center Range CAPRate
2002 Strip 8.3 - 10.8% 9.6% Notes
Anchored 7.9 - 9.5% 8.9%
All Centers 7.9 - 10.8% 9.2%
2003 Strip 8.0 - 9.6% 8.8% End 07 Market
Anchored 7.0 - 9.5% 8.7% Turns
All Centers 7.9 - 9.6% 8.7%
2004 Strip 6.5 - 8.9% 7.6%
Anchored 7.0 - 9.4% 7.6%
All Centers 6.5 - 9.4% 7.6% 08 Caps ↑ 10 bps
2005 Strip 6.4 - 7.8% 7.1%
Anchored 5.9 - 8.6% 7.2%
All Centers 5.9 - 8.6% 7.1%
2006 Strip 5.5 - 10.1% 6.9% 08 Sales Volume ↓
Anchored 5.7 - 7.7% 6.7%
All Centers 5.5 - 10.1% 6.8% 75% compared to
2007 Strip 5.8 - 8.1% 6.8% 07
Anchored 6.2 - 7.3% 6.7%
All Centers 5.8 - 8.1% 6.8%
2008 Strip 6.5 - 7.0% 6.7%
Anchored 6.5 - 7.6% 7.0%
All Centers 6.5 - 7.6% 6.9%
Source: PGP Valuation, Inc. Database
National OAR Averages - Strip Centers

7.55%
7.50%
Notes
7.49%
7.45%
7.40% 3Q07 Market Turns
7.35%
7. 34%
7.30%
7.33%
↑ 16 bps
7.32%
4Q08 Caps
7.25%
7.28%
7.24%
7.20%
46 bps ↑ projected
7.20%
7.15%
through 2Q09
7.10%
7.05%
2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08
Source: Korpacz Strip Shopping Center
National OAR Averages - Power Centers

7.70%
7.60%
Notes
7.57%
7.50%
7.40% 3Q07 Market Turns
7.30%
7.20% 4Q08 Caps ↑ 40 bps
7.17%
7.17%
7.10%
7.13%
7.13%
7.00%
7. 06%
58 bps ↑ projected
7.00%
6.90% through 2Q09

6.80%
6.70%
2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08
Source: Korpacz Power Center
Investment Sales
2008 Retail Sales
Category Anchored Strip Other*
Size
Low 40,800 12,000 1,690
High 78,292 27,710 14,820
Average 53,306 16,465 5,264
Sale Price
Low $6,925,000 $1,575,000 $625,000
High $16,762,867 $6,200,000 $7,300,000
Average $12,165,717 $4,018,250 $2,607,479
Sale Price/SF
Low $170 $131 $191
High $322 $347 $835
Average $226 $248 $528
Cap Rates
Low 6.5% 6.5% 6.0%
High 7.6% 7.0% 8.5%
Average 7.0% 6.7% 7.2%
Source: PGP Valuation, Inc. Database *Fast food, freestanding & NNN
Selected
Sales
Berryhill Retail
Center
Oregon City, OR
Price: $8,600,000
Price/SF: $204
NRA: 42,129 SF
Date: 2/28/2008
Cap Rate: 7.39%
Anchors: Kmart and Albertson’s Shadow Anchored
Comments: This is the sale of the strip-center component of an
approximate 200,000 SF community shopping
center The information contained herein has been obtained from sources we deem reliable. Although we have no reason to doubt its contents, we do not guarantee them.
Selected
Sales
Lowrie’s
Marketplace
Wilsonville, OR
Price: $16,762,867
Price/SF: $322
NRA: 52,001 SF
Date: 10/10/2008
Cap Rate: 6.75%
Anchors: Albertsons
Comments: Property was never on market and was sold after a
private party made an offer
Selected
Sales
Valley River North
Eugene, OR
Price: $16,375,000
Price/SF: $209
NRA: 78,292 SF
Date: 8/28/2008
Cap Rate: 7.57%
Anchors: Petco, Barnes & Noble and Ross
Comments: Sale of the center across the street from the Valley
River Mall. Perceived risk of anchor tenant rents applied
upward pressure to cap rate.
Portland
Metro
Power Center-$16.38 Specialty Center- General Retail-

Shopping Center- $32.00
Mall-$25.75 $17.14
Total Market-$18.49
$19.61
2008 YTD Summary

• Vacancy rates increasing
• Cap rates increasing
• New construction stagnant
• Retail rents softening
2009 Projections
• 2009 lowest amount of new space delivered in a decade
– New construction will grind to a halt
• The 1st & 2nd quarters will give perspective as to the depth
and length of the problems retail landlords will face as post-
holiday store closures are fully realized
– Power and regional centers likely to take the biggest hit
– Healthy retailers in 2009 will be able to take advantage of the
market; more so than perhaps at any time since the recession
of the early 1990s
• Slightly greater investment sales volume compared to 08
– Savvy investors will capitalize on overleveraged owners
misfortunes
– Cap rates from 7-8+%; more cap rates >8% than <7%
Download The Presentation

http://www.retailnewsblog.com/ccim/

2009 CCIM Presentation

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2009 CCIM Presentation

Uploaded by

Copyright:

Available Formats

a Colliers CMN Company

PGP Valuation, Inc

The Housing Market

Industrial & Office Markets

Industrial Market Overview

• Slowing economy has and will continue to shape the

Industrial Market Overview

Period Market Submarket Market Submarket

2003 206,479,984 13,943,125 11.0% 11.1%

2008 YTD 217,071,293 17,567,392 6.0% 11.3%

AVERAGE ASKING RENT PSF/MO. (NNN) NET ABSORPTION

Period Market Submarket Market Submarket

2003 $0.38 $0.37 3,942,713 865,367

Q1 2008 $0.45 $0.42 65,229 -7,743

2008 YTD $0.46 $0.43 -390,322 142,102

Source: CoStar Property® NNN = Triple Net Y-T-D = Year-to-Date

Industrial Construction – Portland Market

Completed Construction 1st Qtr. 2008:

What does it mean?

Industrial Market Trends / Forecast

Like the industrial sector, the office market is

Office Market – All

Portland Office Vacancy, Q4-2008

• Net absorption for the CBD at +371,701 for 2008. Overall

Overall Cap Rates

Regional Retail Market

 Largest change since 2000

 2009 – Likely first (-) negative absorption in over a decade

 More national tenants go dark

 Local and regional tenants struggle in harsh economy

Portland Metro: Where is the Vacancy?

Portland Metro: Where is the

Represents 1% of +/- 42 Million SF metro wide

Portland Metro: Soon to be Vacant

2008 US Store Closings

• Many spaces go dark in 2008

Investment Grade Sales

National OAR Averages - Strip Centers

National OAR Averages - Power Centers

6.90% through 2Q09

Power Center-$16.38 Specialty Center- General Retail-

2008 YTD Summary

Download The Presentation

You might also like